For a government that has lost no opportunity to proclaim it has rolled out a red carpet for private investors, especially in the space sector, its latest move against Devas Multimedia should make us all sit up. Earlier this week, it authorized Antrix Corp to ask the National Company Law Tribunal (NCLT) for the winding up of Devas, a private firm to which the commercial arm of the state-run Indian Space Research Organisation (ISRO) owes $1.2 billion, awarded by an international arbitration court in 2015 for a broken contract and confirmed by a US federal court last October. Our Supreme Court stayed the award shortly afterwards, and the NCLT has admitted Antrix’s plea to liquidate Devas and appointed a provisional liquidator, though the arguments of both sides are still being heard. Antrix has invoked an obscure clause of the Companies Act that allows for a firm to be wound up if it is found to have been set up for fraudulent and unlawful purposes, or if its promoters or management are guilty of fraud, misfeasance or misconduct, or if its affairs were conducted in a fraudulent manner. The tragic aspect of this case is the high likelihood that Devas has been a victim of political circumstances.
For a government that has lost no opportunity to proclaim it has rolled out a red carpet for private investors, especially in the space sector, its latest move against Devas Multimedia should make us all sit up. Earlier this week, it authorized Antrix Corp to ask the National Company Law Tribunal (NCLT) for the winding up of Devas, a private firm to which the commercial arm of the state-run Indian Space Research Organisation (ISRO) owes $1.2 billion, awarded by an international arbitration court in 2015 for a broken contract and confirmed by a US federal court last October. Our Supreme Court stayed the award shortly afterwards, and the NCLT has admitted Antrix’s plea to liquidate Devas and appointed a provisional liquidator, though the arguments of both sides are still being heard. Antrix has invoked an obscure clause of the Companies Act that allows for a firm to be wound up if it is found to have been set up for fraudulent and unlawful purposes, or if its promoters or management are guilty of fraud, misfeasance or misconduct, or if its affairs were conducted in a fraudulent manner. The tragic aspect of this case is the high likelihood that Devas has been a victim of political circumstances.
The dispute relates to a 2005 deal worth $300 million between Antrix and Devas under which the former was to make, launch and operate two satellites for the Bengaluru-based space startup that needed S-band transponders to offer a range of services. Sadly, all it took was the telecom airwave scandal that arose a few years later for allegations to fly around that Devas had got S-band spectrum at a throwaway price. That the two kinds of resources were incomparable, with telecom airwaves in far greater demand and thus dearer, was lost in all the noise. Already under pressure, the then United Progressive Alliance government lost its nerve on the Devas deal and cancelled the contract in 2011. As the band in question was earlier earmarked for military use, it cited security as the reason. Left in the lurch, Devas, which had global investors, sought justice at a tribunal of the International Chamber of Commerce and won its case. That ruling in its favour was upheld three months ago by a US court, which said the involvement of foreign investors meant that India had to accept global arbitration as a signatory to the New York Convention.
That our apex court suspended the US order is a matter of dismay, and if the NCLT case goes against Devas, a company with innovative ideas on the use of satellites would cease to exist. Our record of respect for international arbitration has been dismal, at best, given the government’s open efforts to defy orders that place financial demands on the exchequer. We saw this in the Vodafone and Cairn Energy tax cases. Doubts over the stability of India’s rule of law could hurt investor confidence in the country. While perceptions of the government as a bully tend to deter private investment in general, the Devas story has the potential to put our space reforms at threat. The government recently made a policy announcement on opening up ISRO’s facilities to private players keen to launch satellites and use them for various consumer services, be it digital apps that require the live location data of its users, or weather forecasts that focus on specific activities. The idea was to attract capital and have ISRO work with the private sector. Blatantly unfair decisions that penalize the latter don’t serve the country well.